On May 7, 2015, the Cabinet approved amendments to the Thai Revenue Code aimed to clarify Thailand’s position on transfer pricing. Previously, the only guidance on transfer pricing has come more informally in via Revenue Department instructions (namely, Departmental Instruction No. 113 issued in 2002).
The amendments are only referred to generally in the Cabinet’s resolution approving the amendments, and we anticipate that the Director General of the Revenue Department will provide subsequent regulations for clarification. However, the main provisions of the amendments based on our review of the Cabinet’s resolution approving the amendments are as follows:
Revenue Department Authority
The Revenue Department officers will have authority to review a company’s revenue and expenses on inter-company transactions to assess whether or not transfer pricing has taken place and impose such assessment on the relevant companies.
To mitigate the chances of double taxation (although how this might occur is not clear from the Cabinet’s resolution), taxpayers who have overpaid taxes on related party transactions as a result of a transfer pricing assessment will have the right to file a tax refund claim within the later of
60 days after receiving notification of tax assessment; or
3 years from the due date for filing the tax return
Simultaneous Documentation Requirements
Taxpayers suspected of engaging in transfer pricing will be required to prepare and file transfer pricing documentation with the Revenue Department in the same time frame as required for corporate income tax return filings.
The transfer pricing documentation will include the following:
A description of the relationship between the relevant related parties
The method used in calculating transfer prices on related party transactions.
If a taxpayer fails to provide transfer pricing documentation, files incomplete documentation, or provides false statements in the documentation, the taxpayer is liable to monetary penalty not exceeding Baht 400,000.
While the amendments have been approved by the current Thai Cabinet, they will still need to be passed by the National Legislative Assembly to become law. Watch this space for further developments once the amendments become law.